Loblaw Reports 2021 Fourth Quarter Results and Announces Net-Zero Carbon Emission Commitment¹
BRAMPTON, ONTARIO February 24, 2022 Loblaw Companies Limited (TSX: L) (“Loblaw” or the “Company”) announced today its unaudited financial results for the fourth quarter ended January 1, 2022 and the release of its 2021 Annual Report - Financial Review (“Annual Report”). The report includes the Company’s audited financial statements and Management’s Discussion and Analysis (“MD&A”) for the fiscal year ended January 1, 2022. The Company’s 2021 Annual Report will be available in the Investors section of the Company’s website at loblaw.ca and will be filed on SEDAR and available at sedar.com.
2021 Q4 AND FULL YEAR FINANCIAL AND OPERATING RESULTS
In the fourth quarter, Loblaw experienced strong demand as consumers continued to eat-at-home, particularly over the holiday period. The Company’s focus on retail excellence resulted in operational and financial improvements, despite supply chain and inflationary pressures. Discount banners (representing 60% of Loblaw’s Food Retail network) benefited from the return of price-sensitive customers, and conventional Market stores extended strong performance, with impactful promotional strategies. Drug Retail front-store and prescription sales benefited from the loosening of social restrictions in the quarter. The Drug Retail business continued to play an important role in supporting communities nationwide with COVID-19 testing and vaccine services. Loyalty and data-driven marketing promotions across the portfolio were effective as customers responded favourably to mass and personalized offers.
“Loblaw showed strength in the fourth quarter as we delivered improved results across the board,” said Galen G. Weston, Chairman and President, Loblaw Companies Limited. “We are effectively managing through a challenging environment of supply chain constraints and higher costs. With a clear strategic agenda, we remain confident in our ability to create value over the long term.”
LOBLAW COMMITS TO NET-ZERO CARBON EMISSIONS
In 2016, Loblaw committed to a 30-percent reduction in corporate carbon emissions by 2030. It achieved the target in 2020, with advancements in energy management, equipment conversions, and through addressing refrigerant leaks. Informed by the Science Based Target Initiative, the Company is raising and expanding its ambitions to its full corporate, independent and franchise store network, its distribution centres, and ultimately its supplier network. Today, the Company announces a long-term roadmap: achieving net-zero carbon emissions for Loblaw’s operational footprint by 2040, and achieving net-zero for Scope 3 emissions, including those generated by suppliers, by 2050.
“Climate change is one of the biggest issues of our time,” said Galen G. Weston, Chairman and President, Loblaw Companies Limited. “We are committed to doing our part, extending our past progress by setting an ambitious net-zero target.”
Founded on a long-standing corporate social responsibility program, Loblaw has a growing record of Environmental, Social and Governance (ESG) performance. It is committed to fighting climate change, taking action on carbon emissions, plastic waste and food waste, and it has impactful social commitments to deliver workforce diversity, equity and inclusion and nation-leading support for childhood hunger and women’s access to care.
In the quarter, Loblaw continued its efforts to make a positive impact in the communities in which it operates:
Demonstrated leadership on tackling plastic waste with the introduction of new Sustainable Packaging Standards to all control-brand suppliers, supporting Loblaw’s commitment that all control-brand packaging will be recyclable or reusable by 2025. These standards align with the Golden Design Rules for packaging, established by global Consumer Goods Forum Plastic Waste Coalition of Action, co-sponsored by Loblaw President and Chairman, Galen G. Weston.
Completed annual charitable activities donating and raising more than $90 million in support for community organizations, through the corporate and store activities, supported by colleagues, suppliers and customers.
Mobilized an immediate response to support citizens affected by flooding in British Columbia. The Company matched in-store donations totaling $390,000 for the Canadian Red Cross, supplemented by in-kind items donated in-kind.
2021 FOURTH QUARTER HIGHLIGHTS
Unless otherwise indicated, the following highlights include the impact of COVID-19 and are presented on a comparable⁴ 12 week basis.
Revenue was $12,757 million. This represented an increase of $349 million, or 2.8% when compared to the fourth quarter of 2020.
Retail segment sales were $12,486 million. This represented an increase of $321 million, or 2.6% when compared to the fourth quarter of 2020.
Food Retail (Loblaw) same-stores sales increased by 1.1%.
Drug Retail (Shoppers Drug Mart) same-store sales increased by 7.9%, with pharmacy same-store sales growth of 10.2% and front store same-store sales growth of 6.1%.
The two year sales Compound Average Growth Rate (“CAGR”)⁵ was 4.8% and 5.5% for Food Retail and Drug Retail, respectively.
The Company’s e-commerce sales decreased by 8.4% (2020 – increased 158%) due to the lapping of high e-commerce sales in the fourth quarter of 2020.
COVID-19 related costs were approximately $8 million (2020 – approximately $42 million).
Retail segment adjusted gross profit percentage² was 30.9%. This represented an increase of 150 basis points compared to the fourth quarter of 2020.
Operating income was $705 million. This represented an increase of $70 million, or 11.0% when compared to the fourth quarter of 2020.
Adjusted EBITDA² was $1,324 million. This represented an increase of $78 million, or 6.3% when compared to the fourth quarter of 2020.
Net earnings available to common shareholders of the Company were $744 million. This represented an increase of $434 million, or 140.0% when compared to the fourth quarter of 2020. Diluted net earnings per common share were $2.20. This represented an increase of $1.32, or 150.0% when compared to the fourth quarter of 2020.
Net loss attributable to non-controlling interests was $28 million in the fourth quarter of 2021 and represents the share of earnings that relates to the Company’s Food Retail franchisees. Franchisee earnings are impacted by the timing of when profit sharing with franchisees is agreed and finalized under the terms of the agreements. On a full year basis, net earnings attributable to non-controlling interests of $101 million increased by $26 million when compared to 2020, reflecting an improvement in franchisee earnings.
During the quarter, the Company recorded a recovery of $301 million related to the Supreme Court of Canada’s decision on the Glenhuron Bank Limited (“Glenhuron”) tax matter, of which $173 million is recorded as interest income and $128 million is recorded as income tax recovery. In addition, net interest of $16 million, before tax, was recorded in respect of interest income earned on expected cash tax refunds. This recovery is expected to be received in 2022 and will increase the Company’s cash and cash equivalents balance.
Adjusted net earnings available to common shareholders of the Company² were $515 million. This represented an increase of $119 million, or 30.1% when compared to the fourth quarter of 2020.
Adjusted diluted net earnings per common share² were $1.52. This represented an increase of $0.40, or 35.7% when compared to the fourth quarter of 2020. The two year adjusted diluted net earnings per common share CAGR⁵ was 30.0%.
The two year adjusted diluted net earnings per common share CAGR⁵ was positively impacted by lower fixed asset impairment in 2021 when compared to 2019. The impact on the CAGR⁵ was 7.3%.
The Company repurchased, for cancellation, 2.0 million common shares at a cost of $200 million and 15.6 million common shares at a cost of $1,200 million on a year-to-date basis.
The Company invested $381 million in capital expenditures and generated $460 million of Retail Segment free cash flow².
Note: This is an excerpt from the full release. To view the complete document, please download the full Q4 2021 news release.
¹This News Release contains forward-looking information. See “Forward-Looking Statements” section of this News Release and the Company’s 2021 Annual Report for a discussion of material factors that could cause actual results to differ materially from the forecasts and projections herein and of the material factors and assumptions that were used when making these statements. This News Release should be read in conjunction with Loblaw Companies Limited’s filings with securities regulators made from time to time, all of which can be found at sedar.com and at loblaw.ca.
²See “Non-GAAP Financial Measures” section of this News Release, which includes the reconciliation of such non-GAAP measures to the most directly comparable GAAP measures.
³To be read in conjunction with the “Forward-Looking Statements” section of this News Release and the Company’s 2021 Fourth Quarter Report to Shareholders.
⁴Certain figures have been restated due to the non-GAAP financial measures policy change. See section 17 “Non-GAAP Financial Measures” of the Company’s 2021 Annual Report - Financial Review.
⁵Compound Average Growth Rate (“CAGR”) is the measure of annualized growth over a period longer than one year. CAGR as disclosed by the Company is the mean annual growth rate over a two year period, 2019 to 2021.
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